occasionally bombarding the headquarters in an irregular manner

May 29, 2014

no mattress large enough

So a bureau chief a Chinese state level agency - roughly the equivalent of a departmental director under a minister in the UK - gets busted for the usual discipline violations. Then this happens:

Earlier in May, when investigators searched Wei Pengyuan, deputy chief of China’s National Energy Adminstration’s coal bureau, they uncovered more than 100 million yuan ($16 million) in 100-yuan notes. To put the numbers into perspective, that’s 1.15 ton, or 2 cubic meters (just a little bit smaller than a typical restroom in an apartment), of cash.

The amount was even too much for cash-counting machines – 16 were ordered to count the stack, and 4 burned out due to overheating. Many Chinese netizens joked that China should adopt “cash-counting machine” as the new measurement of money when it comes to corrupt officials, as in “He has 2 cash-counting machines of money at home.”

The guy turned out to have bought a flat just to stash his money in. This could be a signal that the anti-corruption drive is having some effect; not only in monitoring bank accounts and conspicuous consumption, but also looking out for the various informal alternative currencies - debit cards, art, high end baijiu and cigarettes, property and so on - used to launder bribes. Wang Qishan, the man in direct charge of rooting out pelf was formerly one of China's top finance guys, and he appears top know all the tricks. So now you can't take it in anything but money, and then you've got nowhere to put it. Alternatively, Mr Wei might just be a clasic miser.

Even if this is a sign that the Discipline Inspectors are winning, that in itself could be a problem:

Economic collapse was among the many factors that brought the Ming Dynasty to an end. The reason? A serious cash flow problem because too much of the nation’s wealth was stored in corrupt officials’ basements.

If they had 16 machines, they ought to have been able to count around 12,000 notes a minute. So the total count should have been done in well under two hours, and to burn out for machines seems like really bad operator error. Counting a million notes is not at all an unknown activity for banks, so I would guess that we can also take away from this story the conclusion that the anti corruption squad aren't yet used to handling large volumes of notes.

A few days ago, I came across a wonderful Yuan-dynasty sanqu poem that rang a few bells. In a quick'n'dirty translation:

奪泥燕口。
削鐵緘頭。
刮金彿面細搜求。
無中覓有。
鵪鶉腺褢尋豌豆。
鷺鷥腿上劈精肉。
蚊子腹內刳脂油。
虧老先生下手。

He'd snatch the mud from a swallow's gob,
shave iron from a pin,
peel the thin gold leaf off a Buddha's face --
steal where there's nothing at all to steal:
The peas in the stomach of a quail,
the juicy meat on the legs of a stork,
the grease in a mosquito's gut --
His for the taking. Just watch him work.

Economic collapse was among the many factors that brought the Ming Dynasty to an end. The reason? A serious cash flow problem because too much of the nation’s wealth was stored in corrupt officials’ basements.

This is a Keynesian depression, isn't it? All anyone wants to do with cash is to stash it away, for fear of bad stuff (i.e. really high precautionary demand for money), so the investment component of aggregate demand collapses, prices fall, and as a result, the real interest rate is still too high for the cash to re-emerge even after the nominal rate hits the zero lower bound.

I would like to see the numbers on the amount of wealth that corrupt officials would have to hide in order to create a Keynesian depression...
The Ming Dynasty collapsed in part because of a shortage of externally supplied silver, but that was as much to do with Spanish and Japanese policies as it was to do with hoarding (by merchants as well as by corrupt officials) and most of the money supply was in the form of copper cash or paper anyway.